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it’s going to cost you more. Low capex because if you don’t have a lot of money, you can still rent a facility.
It took a couple of years of thought to work this all out, but we were executing on this plan by 2005. So when people say that we pivoted to all these other things because fuels were too hard, it’s really inaccurate. It takes many years to go from concept to product on the shelf. We started doing work on cosmetics and nutritional supplements in 2005. We launched Algenist in 2011, and our nutritional supplements in 2010. This was always part of our strategy.
X: Okay, so what have you learned along the way about making oils?
JW: We hoped that we would get good enough with this platform to make some modest changes to the profile of oils along the way—something the big agricultural biotech companies have been trying to do for a couple of decades now, to make healthier soy and better vegetable oils, with very limited success. What happened for us, along the way, is that we ended up developing a platform that allows us to tailor oils in a way that has never been done before.
A triglyceride is a glycerol molecule with three fatty acids coming off it that make it look like a capital E. There are many triglycerides—palm oil, canola oil, cashew oil, primrose oil—but they are all made from the same kinds of fatty acids like capric acid, lauric acid, and oleic acid. We have developed the ability to optimize which fatty acids are attached, at what percentage, and even where they sit.
X: How does that help you?
JW: The reason it matters is—for instance, when you eat chocolate, it has a very particular melting curve, between 85 and 95 degrees Fahrenheit, and what gives chocolate that melting property and mouth feel is how many carbons are in each fatty acid and where they sit. So the ability to optimize this means that, for instance, you can make oils that have a very specific melting curve, so they’ll behave in certain ways in a food or in a lipstick.
I like to think about transformer fluids. If you live on a street with electric poles, there are big green humming cylinders on the poles, and for many years those transformers were filled with PCBs that allowed them to stay cool and were non-conductive. We found out that PCBs are incredibly harmful to people so we replaced them with mineral-based or petroleum-based oils. Unfortunately, unlike PCBs, mineral oils have a low flash point, so you get transformer fires like the one that put half of Boston in the dark last year. One of the benefits of petroleum-based transformer fluids is that they are stable for 20 years or more, but they are not stable and liquid at the same time. We developed a profile that allows the triglycerides to be liquid, highly stable, and to have a flash point that is twice as high as the incumbent petroleum-based fluid. So you get something that not only has a lower fire risk, but is biodegradable.
There are many other examples. Think about frying oils. If you are frying food in oil you want to get performance for a long time, so restaurants and food manufacturers were using partially hydrogenated oils like soy oil that stay liquid and stable. But then you end up with trans fats, which are really bad for your cardiovascular system. We have been able to demonstrate that we can make incredibly healthy unsaturated oils that perform the same as partially hydrogenated oils. Some of these oils can be used for much longer, so they’re worth more.
I can tell you that there have been a multitude of errors and misjudgments along the way, but the end result has been two steps forward and hopefully not more than half a step back. It’s been 10 years, but we are finally at a point where we have two products in the market, in nutritional supplements and cosmetics. We have very large plants coming online in Brazil, France, and Iowa, and we are also running a demo and commercial facility in Peoria, Illinois, where we do production for a lot of the cosmetic ingredients.
X: It’s often hard to get customers to switch to a new product like a longer-lasting frying oil unless it’s also cheaper. Can your oils compete on cost?
JW: It depends on the product line. One study determined that our oil had a little over three times the oxidative stability of a premium, high-oleic frying oil that is commonly used today. At the end of a 10-day fry study, it had more days of fry life left than the premium canola oil had at the beginning.
Let’s say your canola costs $1 per bottle. If our oil lasts three times as long, it should theoretically be worth at least $3. Now, the reality is you wouldn’t move into a market by charging that. You would charge something less than the multiple. So the oil may still be more expensive, but the cost to the user is substantially less.
I’m not saying how we would price the oil, but either we have to provide something at a better cost, or we have to be able to provide a better product. In the case of the frying oil, the cost of use is less and you get tangible consumer benefits, because it’s heart-healthy.
X: Are you hoping that you’ll be able you apply this tailoring ability to fuels in the future?
JW: Yes, it works even in fuels. In a barrel of crude oil, you can assume that some of that barrel is worth a low price, some of it is worth a medium price and some is worth a high price when you send it to the refinery. If want our plants to have the highest margins then we are going to focus on the most valuable cut of the barrel of oil and producing a blend stock. Maybe take a heavy sour crude from Venezuela and uplift it so that you can run it in a refinery that hasn’t been refitted. Or take a light sweet oil and blend it with bunker fuel so that you can uplift it to a low-sulfur diesel.
I’m not telling you that down the road we won’t be producing a one-to-one replacement for petroleum. But right now I’m telling you we don’t need to do it. It doesn’t make sense, from a company-building perspective, to focus on making the whole barrel—it makes sense to focus on a component of the barrel.
X: What about the cost of your feedstocks? You have to get the carbon from somewhere. Finding cheap, non-food-crop sources of biomass that has been a major pitfall for biofuels producers.
JW: Yes, absolutely. You should think of this as a platform that converts biomass into oil, and the conversion cost is driven largely by the cost of the input biomass. One thing we’ve demonstrated is that … Next Page »
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